Pound slides amid UK rating cut

Britain’s currency drops following a downgrade of the country’s credit outlook

UK sterling dropped on Thursday after ratings agency Fitch lowered the outlook for the country, citing risks posed by the chancellor’s mini budget.

The pound was trading down almost 1% against the US dollar, at $1,122 as of 14:33 GMT. The currency nosedived to a record low against the dollar last month and some British government bonds took the deepest tumble in decades, forcing the Bank of England (BoE) to stage a £65 billion (almost $73 billion) intervention to try to stabilize markets.

“The large and unfunded fiscal package announced as part of the government’s growth plan could lead to a significant increase in fiscal deficits over the medium term,” Fitch said in a statement on Wednesday.

The downgrade came just days after a similar move by Standard & Poor’s ratings agency.

According to Fitch, the lack of independent budget forecasts, as well as an apparent clash with the BoE’s inflation-fighting strategy had “negatively impacted financial markets’ confidence and the credibility of the policy framework, a key longstanding rating strength.”

READ MORE: UK forced to reverse tax cut for highest earners

UK Finance Minister Kwasi Kwarteng announced £45 billion ($51 billion) in unfunded tax cuts in the September 23 statement alongside large energy subsidies and other measures aimed at boosting growth. On Monday, he said he would not go ahead with part of the tax cuts, scrapping the top 45p income tax rate, which it was estimated would have cost the Treasury £2 billion ($2.2 billion) a year.

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